Question

Criminal, search and seizure and securities fraud law

The SEC is investigating Cheato Corp., a real estate sales company, for securities fraud. SEC investigators go to Cheato's main office and tell the CEO they must search the entire office. The CEO objects to this, but the investigators ignore the objection and look through various file cabinets. In one cabinet they find documents that indicate that the CEO and other corporate officers intentionally issued false financial statements.

Can the SEC use these documents as evidence in prosecuting Cheato Corp. for criminal violations of the Securities Act of 1934?

Answer 1

No.

SEC or any other authorities cannot search premises without a valid search warrant from an established officer. This is a right given to every American and also organizations in the Fourth Amendment of the constitution. This amendment protects organizations and individuals against unlawful search and seizure.

In this scenario, since the SEC violated the civil rights of the organization in obtaining the evidence, they will not be accepted in the court as evidence. As a result, they will not be able to use these documents as evidence for prosecuting Cheato Corp.